Opinion
No. 36792.
January 26, 1948.
1. TRUSTS.
Where benefactor conveyed residence to trustees of Diocese of Mississippi for Old Ladies Home, and conveyed bonds to bank under declaration of trust requiring bank to devote income to maintenance of Home, but thereafter, as result of rising costs and decreased income, the income was insufficient to cover expenses, court properly authorized bank to supply difference between income and needed amount, up to $6,000, by invasion of corpus.
2. TRUSTS.
Court will permit trustee to deviate from terms of trust if owing to circumstances not known to the settlor or not anticipated, compliance would defeat or substantially impair the accomplishment thereof.
APPEAL from the Chancery Court of Warren County.
Dent Ward and Burkett H. Martin, all of Vicksburg, for appellant.
A trustee may make such an application for guidance before making a disposition of the trust property the propriety of which is in doubt, and, indeed, he should seek the guidance of the court in such a case.
54 Am. Jur. 222, Sec. 282.
The trustee is entitled to apply to the court for instruction as to the administration of the trust if he is reasonably in doubt as to his duties or powers as trustee.
1 Restatement of the Law on Trusts 806, Sec. 259.
The benefits intended for the beneficiaries are the main subjects of consideration. The modes in which those benefits may be attained are incidental, and necessity may require a change of mode to produce the intended effect. The power of the court may well be exercised in a case of evident necessity.
Low et al. v. First National Bank Trust Co. of Vicksburg, 162 Miss. 53, 138 So. 586.
In an emergency the court has the power to authorize a departure from the terms of the trust to effectuate the ultimate purpose of the settlor.
In re Stack (Wis.), 258 N.W. 324, 97 A.L.R. 316; In re Van Deusen's Estate (Cal.), 175 P.2d 908; 54 Am. Jur. 225, Sec. 284.
Green Green, of Jackson, for appellee.
Under the terms of the deed to the trustees of the Diocese of Mississippi requiring the residence to be solely used for maintenance of an Old Ladies Home and the trust to the bank, it was the intention that this particular charity should be continued precisely as the chancellor did.
Under the parole evidence introduced as to the donor's intention, the chancellor's decree was imminently correct. Normally, parole evidence is not admissible in this aspect, but where that at issue is the intention of a donor under such a trust, that intended may be so thus proved.
In re Van Deusen's Estate, Bright v. Bank of America and National Trust Savings Association, 175 P.2d 908.
A court of equity may modify the terms of a trust when the purpose or plan of the trustor would be thwarted by a slavish adherence to the terms of the trust.
In re Van Deusen's Estate, Bright v. Bank of America and National Trust Savings Association, supra; Adams v. Cook, 15 Cal. (2) 332, 101 P.2d 484; Pennington v. Metropolitan Museum of Art, 65 N.J. Eq. 11, 55 A. 468; Mertz v. Guaranty Trust Co., 247 N.Y. 137, 159 N.E. 888, 57 A.L.R. 1114; Marsh v. Reed, 184 Ill. 263, 56 N.E. 306; 65 C.J. 792.
The chancery court possessed power to vouchsafe these old ladies full protection against destitution by authorizing utilization of the corpus.
Low v. First National Bank Trust Co. of Vicksburg, 162 Miss. 53, 138 So. 586, 80 A.L.R. 112, 116; Compare Reedy v. Johnson's Estate, 200 Miss. 205, 26 So.2d 685, 686; Yeates v. Box, 198 Miss. 602, 22 So.2d 411; Mayes v. Mayes, 133 Miss. 213, 97 So. 548; Pennington v. Metropolitan Museum of Art, supra; Curtis v. Brown, 29 Ill. 201, 228; In re Van Deusen's Estate, Bright v. Bank of America and National Trust Savings Association, supra; Burgess v. Nail, 103 F.2d 37; Adams v. Cook, supra; Trust Co. of New Jersey v. Glunz, 183 A. 27, 30; Simon v. Reilly, 126 N.J. Eq. 546, 10 A.2d 474; Trust Co. of New Jersey v. Greenwood Cemetery, 32 A.2d 519, 524; Brown v. Berry, 71 N.H. 241, 52 A. 870; 65 C.J. 684, Sec. 549; 54 Am. Jur. 224, 227, Sec. 284; Restatement of the Law of Trusts, Sec. 167, p. 415; 3 Bogert, Trusts and Trustees, p. 499.
Argued orally by Garner Green, for appellee.
For several years next before the date first hereinafter mentioned Mrs. Fannie Willis Johnson, a widowed resident of Vicksburg, had been interested in benevolent and charitable endeavors. She had a large estate which she freely used for that purpose. As she approached the closing days of her life she conceived as her final and dominant plan and purpose the establishment and maintenance of a home for Protestant old ladies. To this end, on December 6, 1930, she conveyed to named persons as trustees of the Diocese of Mississippi, and their successors in office, her residence in Vicksburg with the stipulation that "the property hereby conveyed shall, after my death, be used solely as a home for Aged Protestant Women."
Two days thereafter Mrs. Johnson delivered to the appellant Merchants Bank and Trust Company state, county and municipal bonds in the aggregate face value of $110,000 under a declaration of trust by which the said bank should devote the entire net income from said bonds solely to the maintenance of the said Old Ladies Home, but the trustee was not authorized to use any part of the principal. It will not be necessary to further pursue the details of the deed and declaration of trust other than to say that except for the unforeseen contingencies, later to be mentioned herein, every necessary and appropriate provision was made in said instruments.
After Mrs. Johnson's death the home was opened sometime early in 1932. For that year and up to the end of the year 1936, the income from the endowment was sufficient to take care of all the expenses of the maintenance of the Home, but for the years 1937 to 1941 and from 1942 to 1946, the necessary expenditures have exceed the income — in 1946 the deficit being approximately $2,000. This was brought about by the facts, first, that many, if not most of the bonds originally deposited had matured and no other could be secured at an equal rate of interest, and secondly because of the rising costs of nearly everything that is necessary in the support of such a home.
The Home at first had been able to care for nine old ladies; lately the number has been reduced to seven. The management has been economical; there has been no waste, or extravagance or diversions of funds. The point has simply been reached when the Home cannot be kept going on the income from its stated endowment, however well or economically managed it might be.
In this situation the Governing Committee of the Home presented its petition to the Chancery Court, making the Bank and all others concerned parties thereto, praying a decree from that court authorizing the bank as endowment trustee to sell sufficient of the corpus of the endowment from time to time to make up the difference between the income and the cost of maintaining the Home. The Court on a full hearing, all parties being present, made the order directing the bank to pay over to the Governing Committee not to exceed $6,000 per annum and to obtain that amount the bank could convert into cash such part of the corpus of the endowment as would be necessary to supply the difference between the income and the needed sum up to $6,000. From this decree the bank has appealed.
We have no doubt of the authority of the Chancery Court to make the decree, and we find that it is amply sustained by the facts. Under the terms of the deed the Johnson residence can be used for no other purpose than for a home for Aged Protestant Women. The facts show that unless the Court allows, as has been decreed by it, the residence must be vacated and thereupon will be untenanted and useless. Had Mrs. Johnson foreseen the situation which has now come about, it is hardly conceivable that she would have left her arrangements in such shape that the dependent inmates would be turned out, and her large residence left vacant, while the endowment would merely accumulate without being of any service to anybody.
The rule is summarized in Section 167 Rest. Law of Trusts as follows:
"The court will direct or permit the trustee to deviate from the terms of the trust if owing to circumstances not known to the settlor or not anticipated by him compliance would defeat or substantially impair the accomplishment of the purposes of the trust; and in such case, if necessary to carry out the purpose of the trust, the court may direct or permit the trustee to do acts which are not authorized or are forbidden by the terms of the trust."
Our accord with that statement is sufficiently evidenced by Low v. First National Bank, etc., 162 Miss. 53, 138 So. 586, 80 A.L.R. 112, 113. A wealth of additional cases to the same effect will be found in the reporter's abstract of appellees' brief.
Affirmed.